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GM Will Buy Back Any Volts on the Market

General Motors (NYSE: GM) under fire for fires under the hood of its popular Chevy Volt electric car, announced today that it would buy back any of the Volts from owners concerned about catching fire.

The move comes after three test vehicles caught fire during testing by the United States government. According to the Associated Press, GM's CEO Dan Akerson said Thursday that GM would recall the 6,000 Volts currently on the road and repair them as soon as scientists can figure out what is causing the fires. Both the company and federal safety regulators are working to uncover the mystery.

"If we find that is the solution, we will retrofit every one of them," Akerson said. "We'll make it right."

What makes the fires so odd is their timing to the testing. Whereas you might expect a car to catch fire after an accident if it is punctured in the right way (say, its gasoline tank is rupured and the fuel hits a spark from the engine), there is a certain psychological time limit to these things.

Yet the Volt fires are happening between one and three WEEKS after the test crashes, causing confusion among the engineers and the government. None of the fires occurred in a timeframe that would put passengers or rescue workers in any danger. There also are no known instances of fires in Chevy Volts in the real world. The only fires have occurred under extreme circumstances, and even then, only one to three weeks after the incident.

Because Chevy Volts are equipped with On-Star, anytime a Volt does crash, a team is dispatched to drain the battery and prevent any lingering fire chances. So, it appears there is little chance of the fires occurring in a real-world scenario.

Still, GM is committed to the safety of its customers, and is doing anything it can to make its car owners happy. Volt owners can trade their car in for a loaner vehicle while this is sorted out, or they can now take the car back for a refund. In a world where most major companies cover up incidents like this, seeing GM behave so proactively is good news, is it not? Isn't this exactly how we want companies to behave when confronted with a challenge like this?

The question is, how will their decision to be upfront and honest affect the bottom line at GM? So far, only two owners have taken the company up on its offer to take a loaner vehicle while the company sorts out the engineering mystery. Will more step forward and ask for total refunds?

ACTION ITEMS:

Bullish: If you think GM's honesty and proactive solutions will help the company in the long run, consider investing in their stock. It could rise if other people look past the current mistake and instead see a company they feel comfortable doing business with.

Bearish: On the other hand, if you think GM sullies its name by bringing up its shortcomings and errors, and will in the end lose business because of this incident, then perhaps you want to short the stock or reduce your holdings. You could also invest in other automakers, if you like the sector but are afraid of GM's exposure here.